Is NY fracking a good idea? Look at Pennsylvania
First was Texas. Next came Pennsylvania and North Dakota. Could New York become the next U.S. shale hotspot?
It's a tantalizing prospect for some, given that the Empire State sits atop not one but two prolific shale formations, the Marcellus and the Utica. According to the most recent data from the United States Geological Survey, both have more than a combined 100 trillion cubic feet of estimated natural gas reserves.
Should New York overcome its deep reluctance to drill for natural gas, some experts say the state has the potential to ride a wave of domestic production—one credited with creating thousands of natural gas-related jobs nationwide. But so far at least, New York has given an ear to environmental interests that point to dangers around accessing the reserves, especially the hydraulic process known as "fracking."
In terms of jobs, a potential model is Pennsylvania, another Northeastern state where fracking has led to a 40 percent surge in oil and gas jobs over the last six years, according to Labor Department statistics. New York has the means, but not the desire: A recent poll showed a clear majority of residents opposed to drilling in the state.
Even so, it has led to visible job creation in Pennsylvania. With shale exploration, "landowners get money, and people need to get hired," said David Kay, economist at the Community and Regional Development Institute at Cornell University.
That can lead to a burst of economic activity that could help rejuvenate a moribund economy in upstate and central New York, analysts said.
Figures from a Penn State University impact study suggest that in 2009, the first year of the Marcellus boom, the Keystone State generated nearly 24,000 jobs and more than $3 billion in economic activity.
"In 2008 there was a huge boom. A piece of the [boom] started here [in New York], but what haven't happened are the drilling and big royalty payments that come with that," Kay said. "That has happened in Pennsylvania."
Along with Pennsylvania's economic benefits, however, have come cases of water contamination. A study published this week in the journal Environmental Science & Technology studied one Pennsylvania facility that's designed to treat so-called flowback wastewater that comes back to the surface after it's injected into the earth as part of the fracking process.
It found sediments downstream from the plant to be very high in contaminants, some of which may be radioactive.
Worries around such cases contributed to New York imposing a moratorium on fracking in 2008.
In the meantime, ongoing deliberation in New York's top court could prove pivotal to deciding whether towns and cities have the authority to ban the controversial drilling process. Drilling bans by two New York towns, Middlefield and Dryden, are being challenged by exploration firms Cooperstown Holstein and Anschutz Exploration, respectively.
Trying to gauge the real jobs effect
The effects of natgas production on job creation are the subject of nearly constant analysis.
The industry group America's Natural Gas Alliance, which supports fracking, predicts that fracking-related activity will surge by 60 percent by 2035, and will help to create more than 1.6 million new jobs. Most recently, an IHS study said fracking currently supports more than 1.7 million U.S. jobs, with that amount growing to a projected 3 million jobs by the end of the decade.
A 2011 report by the Public Policy Institute of New York State claimed that if the Empire State embraced fracking, 500 shale gas wells could sustain a mix of 62,000 new jobs—many of them in struggling areas of the state.
Clean air and water advocacy groups take issue with the rosy job creation estimates, stating that no amount of job creation can overcome the detrimental environmental effects.
"Natural gas producers have been running roughshod over communities across the country with their extraction and production activities for too long, resulting in contaminated water supplies, dangerous air pollution, destroyed streams, and devastated landscapes," said the National Resources Defense Council, on its website. Last year, the NRDC also filed a friend of the court brief in support of a court case to maintain a ban on fracking in New York.
Even supporters voice some doubts about how big a jobs boost the state can get from fracking. Some analysts argue that the economic impact is relatively isolated, citing a dislocation effect that sees drilling workers live in areas other than where they work. That means the money they make may get spent elsewhere, rather than in the area where fracking actually takes place.
"In very local areas it will be a very big deal, but in the region or state as a whole it might be less of a big deal," said Cornell's Kay. Still, "in the short term there's no question there are positives: there is money flowing into the community."
—By CNBC's Javier E. David.